“Government” rights in federally supported inventions, 2

We might ask, then, what happens if a contractor does not acquire ownership of an invention made in the performance of work under a federal funding agreement. The answer is that 15 USC 2218(d) remains in effect, and even though the Federal Procurement Regulations no longer exist to codify the Nixon patent policy, and even though the replacement Federal Acquisition Regulations are based on Bayh-Dole’s standard patent rights clause, the Nixon patent policy, now without the bother of codification, applies.

The Nixon patent policy sets out conditions under which the federal government should acquire rights (Section 1(a)):

Where . . . [four conditions] . . . the Government shall normally acquire or reserve the right to acquire the principal or exclusive rights throughout the world in and to any inventions made in the course of or under the contract.

Notice that the general requirement for government acquisition has nothing to do with whether a contractor owns an invention–just that the invention was made “in the course of or under the contract.” Even though the codification of the Nixon policy includes a definition of “subject invention” that is one “of the contractor,” the codification’s standard patent rights clause also requires contractors to have patent agreements to “effectuate” the delivery of invention ownership to the government. If the government has the right to receive title, then that title comes through the contractor via the required patent agreement, and so the contractor will own all such inventions, and they will be subject inventions. Bayh-Dole forgets all this and doesn’t require any such patent agreements and furthermore does not stipulate that a federal agency should have any expectation of ownership except in the failure of a contractor, having acquired an invention, to disclose it or file a patent application and follow through on that application. So there’s no standing requirement for government ownership in Bayh-Dole. Bayh-Dole expressly preempts it by preempting the Nixon patent policy requirement of 15 USC 2218(d)!

The four conditions in the Nixon patent policy under which the government should receive title are, briefly, are (i) creation of products for use by the public; (ii) exploration into fields that directly concern public health, safety, or welfare; (iii) in a field dominated by the government’s funding or use; (iv) operation of Government-owned facilities.

Otherwise, if the contract is for something to be used by the government and the contractor has technical competence and an established commercial position, the contractor can retain ownership. For everything else, where the contract isn’t for something to be used by the government, or a contractor lacks technical competence, or lacks an established commercial position, then the government agency should make a determination of rights in such inventions. The determination can be upfront when the contract is issued or after an invention has been disclosed.

Messy but understandable stuff. Some things–including health and safety research inventions–should be the government’s and made available to all (think: open innovation, standards). Some things–acquired from companies in the business of such things–should be the companies’ with a government license. Everything else should be determined at the time of contracting or after an invention has been disclosed.

We can see that as early as the Kennedy patent policy (1963)–the Nixon policy here follows Kennedy closely–the federal government did not claim ownership of all inventions made in federally funded research. It’s just not true. What’s true is that the executive branch policy set a default expectation that in health research, inventions should be owned by the government. But Latker at the NIH in 1968, followed in 1974 by the NSF, created the IPA program to defeat the default for all agency contracts with nonprofit participants–the ones that would end up having to deal with deferred determinations on ownership–at the time of contracting or after an invention had been disclosed. The IPA program went as it were to 11 by setting up a default by an IPA master agreement *before* the time of contracting. Essentially, under the IPA, the federal agency and a nonprofit administration made a deal to ignore the executive branch patent policy. In 1976, Latker tried to get the IPA program adopted as a standard exception to the Federal Procurement Regulations that he had also worked on, but that effort was blocked. Thus, after more messy history, Bayh-Dole in 1979, passed in 1980, effective mid-1981.

There’s one more twist. NIST has added an assignment clause to the standard patent rights clause (at 37 CFR 401.14(f)(2)). But that assignment clause is specific to subject inventions, not to any invention made under contract–only to inventions made under contract that a contractor already owns. Boggle time. If a contractor doesn’t own the invention, then we are back to 15 USC 2218(d) and the Nixon patent policy requirements. But the assignment clause is embedded in a requirement for a “written agreement” that contractors are required to require of their employees (other than nontechnical and clerical employees) to protect the government’s interest. That requirement takes the form of a compulsory subcontract from the contractor to the contractor’s inventive personnel. That subcontract makes those inventive personnel parties to the funding agreement and makes their inventions subject inventions–because the inventors own them! But if the inventors own subject inventions, then the implementing regulations provide a standard patent rights clause for inventors (37 CFR 401.9) and instruct federal agencies to treat inventors as small business firms. As such inventors have the same benefit as other contractors under Bayh-Dole’s general grant at 35 USC 202(a):

Each nonprofit organization or small business firm may, within a reasonable time after disclosure as required by paragraph (c)(1) of this section, elect to retain title to any subject invention . . .

If an inventor may elect to retain title to a subject invention as matter of federal patent law, then a federal agency cannot require any other contractor to take away that title except as provided by that law–that is, by going through the exceptional circumstances provisions of Bayh-Dole. Furthermore, under the standard patent rights clause contractors are forbidden from taking an interest in the subject inventions of subcontractors as a condition of any subcontract. Thus, the NIST-addled assignment requirement at (f)(2) can apply only to the case of equitable title–where a contractor has an equitable right to title based on a circumstance other than anything to do with the federal funding agreement. That makes a huge difference from one class of inventors–university faculty who are formally assured in many university policies of the freedoms of research and publication. A patent is necessarily a publication, and university administrations cannot assign faculty to conduct any research without the faculty member’s voluntary agreement. Do with that what you will.

Of course, it doesn’t matter because no one complies with the (f)(2) requirement, NIST assignment language or not. Thus, inventions made by inventors at non-compliant contractors are, unless a contractor gains ownership, subject to 15 USC 2218(d) and the Nixon patent policy, but without any codification for additional guidance (or confusion).

The scope of the government’s license in any case–Bayh-Dole, the standard patent rights clause, the Nixon patent policy–includes the federal government, the states, and any political subdivision of states, and includes the right to make, use, and sell, and to have made, have used, and have sold. While the compliance with the standard patent rights clause is broadly lacking, it would appear that any non-compliant contractor (or contractor assignee) would have a difficult time bringing a claim for compensation against the federal government or any state or local government operating within the scope of the government license.

A state agency, then, could authorize the manufacturing and sale of a drug based on a federally supported invention–or more precisely, an invention (with multiple patents from discovery through development) made in a project receiving federal support (at the research stage, or at later stages–doesn’t matter). See the definitions of funding agreement and contractor at 35 USC 201 and contemplate why “development” is used.

What have we learned? Bayh-Dole is sloppy stuff. The Nixon patent policy still has life. The states and even municipal governments have broad rights in inventions made with federal support, especially those directed at public health. Nothing has to be done by way of legislation to amend or repeal or replace Bayh-Dole; nothing has to be done by way of executive order to require enforcement of Bayh-Dole or its standard patent rights clause. Any state or local government could act within the scope of the government license, and contractors–whether or not compliant–would have nothing other than piling up lawsuits as a means to stop them. The public interest is served when our governments act on within their authority. The government license provides that authority to act with regard to any privately developed invention that has been supported with federal funds. The public interest is not served when governments–at whatever level–decline to act on matters that are inherent government functions.